August 9, 2020: Election Interference, Clean Network, TikTok and London, Zoom, Shandong, Huawei Chips

This issue covers the period between August 2 - August 9, 2020 with six news stories – three from English language sources, three from Chinese language sources. I intentionally did not include any item directly related to the EOs on TikTok and WeChat. Until more details emerge from the Commerce Department, wait and see is the most prudent approach. Disclaimer: all translated article titles are done by me, not official translations from the media outlets.

“Russia Continues Interfering in Election to Try to Help Trump, U.S. Intelligence Says” (English Source: New York Times)

My Thoughts: The headlines generated by the statement by William R. Evanina, the director of the National Counterintelligence and Security Center, is that Russia prefers Trump, while China and Iran prefers Biden, and all three countries have been doing some level of election interference. Two important nuances from this NYT article are worth highlighting: 1. China’s election interfering sophistication lags behind Russia’s but is growing. An unnamed American official quoted in the piece captured this dynamic rather well. Russia is like a tornado where the threat is more immediate. China is more like climate change where the threat is more long-term but no less grave or concerning. I shared similar sentiments in my article last week on a regulatory framework around TikTok and other apps in the context of foreign influence. 2. China’s election interference focuses more on state and local level elections, not national ones. This observation directly impacts the possible ban on WeChat, which has limited traction in America as a whole but extremely sticky within the Chinese American community. We have already seen WeChat as a primary tool for organizing advocacy activities to oppose affirmative action policies. A few concentrated but well-organized Chinese American local groups can very well swing the outcome of a mayoral, state legislative, and even congressional race.

“Announcing the Expansion of the Clean Network to Safeguard America’s Assets” (English Source: US State Department)

My Thoughts: This so-called “Clean Network” expansion sounds more like a proclamation than a real plan. Like David Pierce of Protocol aptly caveated, this announcement could just be the latest of a long string of examples of the Trump administration “saying things without doing anything”. Even if we take this announcement both seriously and literally, implementing the five components have huge differences in terms of practicality. In my current view, the "Clean Carrier" and "Clean Store" components are the most doable. Carriers are typically either government-controlled or highly-regulated, thus compelling them to not use a vendor for national security concerns is straightforward. (We saw this in the UK’s recent total ban of Huawei, after initially allowing it to build the “non-core” part of its 5G network.) The “Clean Store” part is enabled by the reality that the smartphone operating system ecosystem is essentially a duopoly between Apple and Google. Both companies have followed local laws to ban apps, most recently in India, but most frequently in China. If the American government decides to do the same, it’s all quite doable. Lastly, Pompeo’s announcement mentioned that “more than thirty countries and territories are now Clean Countries” but did not say who. We are left to deduce who they are from this list of “Clean Telcos”, which would appear to include: Canada, France, India, South Korea, Japan, and Taiwan.

“TikTok’s Next Political Fight: Setting Up Shop in London” (English Source: The Information)

My Thoughts: All the recent news around TikTok’s fate in America can get pretty overwhelming, so much so that we forget about other countries. ByteDance is a global company. TikTok is a global product. Thus, its expansion (and related resistance) will continue to be a global phenomenon. TikTok’s ability to set up headquarters in London is one of those threads worth watching. It could also help us understand the UK’s role in all this. Currently, the potential forced-sale of TikTok to Microsoft would include its business in the U.S., Canada, Australia, and New Zealand; the UK is the missing eye of the Five Eyes.

“Impact of TikTok incident expands: Zoom officially stops selling product directly in China” (Chinese Source: AI Frontier)

My thoughts: Didn’t I say TikTok news can get overwhelming? As it turns out, so overwhelming that Zoom decides to further sever its business operations in Mainland China. Zoom will stop all direct sales activities, including upgrades, and only work with distribution partners going forward, in order to further “un-China” itself. This news was widely shared in China, but made few headlines in western media. From a business competitive standpoint, this “soft exit” should give a big boost to Alibaba’s DingTalk and other cloud-based videoconferencing products made by Chinese tech giants. We may also see new startups form in this product vertical, quite possibly by ex-Zoom engineers. After all, the Zoom we’ve all come to love and hate is built mostly by engineers in China.

“The Shandong man who turn things around in the White House” (Chinese Source: Planet Business Forum)

My thoughts: Speaking of Zoom, this piece also made the rounds last week -- a commentary of Zoom CEO Eric Yuan’s political and relationship savviness that has allowed Zoom to avoid the danger of getting banned, like TikTok. After a fairly superficial “analysis” of Zoom’s lobbying power in DC, with HR McMaster (Trump’s first national security advisor) on its board and various long-time Republican lobbyist at its service, the author basically concluded that Zoom could pull this off, because Yuan was born and raised in Tai-an. This city of roughly 5 million people in the province of Shandong, a moderately-sized city by China standards, is known for having people, who are born savvy about human relationships and political systems. The author also shared some “wise” advice for Zhang Yiming, the CEO of ByteDance, to learn Yuan’s way before it’s too late. Zhang, who was born and raised in Longyan, Fujian, “obviously” did not have Yuan’s “genes” when it comes to human relationships. Is hometown really destiny?

“Huawei Kirin chip won’t be manufactured after September 15; Will become a legacy ‘masterpiece’” (Chinese Source: Tencent Tech News)

My thoughts: It looks official that Huawei will run out of its in-house designed Kirin chips for its smartphones later this year. This article lamented the end of Kirin as a true technical “masterpiece”. Whether you think the “masterpiece” label is appropriate or overdone, the Kirin chip is technically at least just as good, if not somewhat better, than both Qualcomm and Samsung in the Android ecosystem based on various benchmarks. (Comparing it to Apple-designed chips for iOS would not be a fair apples-to-apples comparison, no pun intended.) More importantly, Richard Yu admitted that China’s largest domestic chip foundry, SMIC, is incapable of manufacturing Kirin, Thus, Huawei will either have to buy chips from competitors or make less competitive phones, until either the sanctions are (one day) lifted or SMIC (some day) catches up.

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